In the Euro area the focus will be on the two key events, namely ECB Meeting and European Council, on 8-9 December, which might prove a turning-point (positive or negative, if the outcome is disappointing) in the debt crisis...….…
The coming week is thin on data in the United States. The non-manufacturing ISM for November should confirm that the service sector has underperformed manufacturing in this recovery. The October trade balance should show the deficit largely unchanged, while household confidence should confirm a return to the early summer levels.
Monday 5 December
Retail sales are expected to bounce by 0.4% mom in October, mainly on the back of the growth recorded in both Germany and France. However, the trend in consumer confidence suggests fresh weakening in the coming months.
The final reading of the composite PMI for November might confirm the flash estimate of 47.2 (vs. 46.5 in October but below 50 for the third month). The services index should also confirm the first reading of 47.8 (vs. 46.4 in October). The levels of the index are consistent with a for now mild recession in the Euro area.
Italy. The cabinet unveils the crisis-fighting package, which could be passed by parliament by Christmas. A package totalling around EUR 20Bn is mooted, the aim being to achieve budget balance in 2013.
The non-manufacturing ISM is expected to see little change, at 53.2 in November from 52.9 in October. Activity in the service sector should be expanding but not accelerating: in this recovery final demand for goods is growing at a robust pace, in line with past recoveries, but the dynamic in services is far more modest and well below average. The breakdown of the October survey was less positive than emerged from the composite index; last month activity and orders were down heavily on September, whilst remaining well above 50.
Tuesday 6 December
The breakdown of 3Q11 GDP should confirm the flash estimate of 0.2% qoq. Year-on-year growth would slow to 1.4% from 1.6%. The quarter should show growth in both consumption (estimate 0.3% qoq) and investments (0.4% qoq), while public spending should be unchanged and exports may have made a positive contribution of two-tenths. The point is that around year-end 2011/start-2012 there is a real risk of slightly negative GDP.
Germany. Factory orders might bounce (by 1.5% mom) in October after three negative scorse in the summer months. The trend would still be downward, as shown by the slump in the year-on-year figure (our estimate 1.7% vs. 2.4%). For some months now the surveys have been signalling a slowdown in orders for Germany too, notably from abroad.
Wednesday 7 December
Italy. Industrial production is expected to be down again in October, falling by an estimated – 0.2% vs. -4.8% mom in September. This would imply a year-on-year contraction of -2.8% (both raw and adjusted for working days), not far off the previous month’s figure. 4Q11 should show a sharp contraction in industrial production (and GDP), which might continue into 2012.
Germany. Industrial production is expected to bounce by 0.2% mom in October after the falls recorded in the previous two months. However, the trend remains downward (moderate cooling for now): year-on-year growth is estimated at 3.4% vs. 5.4% before. In Germany too industry should make a negative contribution to GDP in the current quarter.
Thursday 8 December
ECB meeting. The European crisis has degenerated significantly this last month. The news on EFSF II from the ECOFIN is not sufficient to change the course of events in the near term. The ECB remains the only institution that can act immediately. The announcement of a structured securities purchase programme would be fully justified, but we fear it will not yet secure a broad consensus on the Council. The ECB might introduce a 24-month or 36-month auction to ease the bank funding issues,. We expect a 25bps cut and rhetoric that clears the way for rates below the significant 1% mark by start-2012, since the repercussions of the crisis on the cycle risk being far more disastrous than the business and household confidence indices are able to capture.
Friday 9 December
The European Council could mark a turning point in the debt crisis. It is to be hoped that, in exchange for tighter fiscal control over member states, progress is made with a European vehicle (possibly with IMF involvement) that may rapidly intervene as a purchaser of substantial volumes on the government bond markets.
France. Industrial production is expected to be down -0.2% mom in October after the steep contraction in September (-1.7% mom). Year-on-year growth would still jump to 2.7% from 2.3%. In any case, the sentiment surveys continue to signal a sharp slowdown in orders and output, impacting on the coming months.
The October trade balance should show a balance little changed from September at USD – 43Bn vs. USD -43.1Bn. Both exports and imports should be down, partly on account of the fall in prices. Export volumes should be positive for autos and machinery. On the import front, the moderate fall in the oil price should moderate the dynamic.
Consumer confidence as measured by the Univ. of Michigan should stabilise at 64 (preliminary) in December, after three straight gains that returned the index to the July levels. The marked improvement in the Conference Board index in November closed much of the gap that had opened up between the two sentiment indicators in recent months. One key element of the Univ. of Michigan survey will be inflation expectations: the Fed is watching expectations closely to assess the case for expanding the monetary stimulus early in 2012.
The financial analysts who prepared this report, and whose names and roles appear on the first page, certify that: (1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures: The analysts who prepared this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.
This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report. Please also note that Intesa Sanpaolo S.p.A. reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both authorised by the Banca d’Italia, are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.
Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.
This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient’s own judgement.
No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report.
This document may only be reproduced or published together with the name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management Policy for managing effectively the conflicts of interest which might affect the impartiality of all investment research which is held out, or where it is reasonable for the user to rely on the research, as being an impartial assessment of the value or prospects of its subject matter. A copy of this Policy is available to the recipient of this research upon making a written request to the Compliance Officer, Intesa Sanpaolo S.p.A., 90 Queen Street, London EC4N 1SA.
Intesa Sanpaolo S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest (“Research Policy”). The Research Policy is clearly explained in the relevant section of Banca IMI’s web site (www.bancaimi.com).
Member companies of the Intesa Sanpaolo Group, or their directors and/or representatives and/or employees and/or members of their households, may have a long or short position in any securities mentioned at any time, and may make a purchase and/or sale, or offer to make a purchase and/or sale, of any of the securities from time to time in the open market or otherwise. Intesa Sanpaolo S.p.A. issues and circulates research to Qualified Institutional Investors in the USA only through Banca IMI Securities Corp., 245 Park Avenue, 35th floor, 10167 New York, NY,USA, Tel: (1) 212 326 1230. Residents in Italy: This document is intended for distribution only to professional investors as defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a printed document and/or in electronic form. Person and residents in the UK: This document is not for distribution in the United Kingdom to persons who would be defined as private customers under rules of the FSA.
US persons: This document is intended for distribution in the United States only to Qualified Institutional Investors as defined in Rule 144a of the Securities Act of 1933. US Customers wishing to effect a transaction should do so only by contacting a representative at Banca IMI Securities Corp. in the US (see contact details above).
Trading Ideas are based on the market’s expectations, investors’ positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.
Coverage Policy And Frequency Of Research Reports
Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer’s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A’s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI’s web site (www.bancaimi.com) or by contacting your sales representative.
Source: BONDWorld – Intesa Sanpaolo – Research Department